FESTSCHRIFT HONORING PROF. ROGER GARRISON PUBLISHED

By Mark Skousen

I’m pleased to announce that the Journal of Private Enterprise has issued its latest volume (Winter 2015 issue) in honor of Roger Garrison, long-time friend and professor of economics at Auburn University:  http://journal.apee.org/index.php/Category:Winter_2015 

garrisonsep2012

Roger Garrison visiting Mark Skousen at his home in New York (with the Totem Pole of Economics in the background).

The festschrift, based on a session I organized at last year’s Association of Private Enterprise Education (APEE) meetings, contains four articles:

Robert F. Mulligan, “Roger W. Garrison and the Integration of Austrian and Mainstream Macroeconomics.” 

Adrian Ravier and Nicolas Cachanosky, “Fiscal Policy in Capital-Based Macroeconomics with Idle Resources” 

Mark Skousen, “Linking Austrian and Keynesian Economics:  A Variation of a Theme” (this is my first refereed paper on Gross Output, the new national statistic the federal government is now publishing quarterly along with GDP). 

Peter Boettke and Candela Rosolino, “Finding the ‘Middle Ground’ in Academia:  Important Lessons from Roger Garrison in Austrian Economics.”

Announcing the New Third Edition of “The Structure of Production”

Federal Government Introduces a New Macro Statistic: A Triumph in Supply-side “Austrian” Economics and Say’s Law

Mark Skousen, The Structure of Production. New York University Press. Third revised edition, 2015, 402 pages. $26 paperback. Available on Kindle.

To buy the book: NYU, Amazon
Quarterly data for Gross Output can be found at the BEA site here.
For Skousen’s latest quarterly report on GO, see this.

From the cover:

SoP3coverweb2In 2014, the U. S. government adopted a new quarterly statistic called gross output (GO), the most significance advance in national income accounting since gross domestic product (GDP) was developed in the 1940s. The announcement comes as a triumph for Mark Skousen, who advocated GO twenty-five years ago as an essential macroeconomic tool and a better way to measure the economy and the business cycle. Now it has become an official statistic issued quarterly by the Bureau of Economic Analysis at the U. S. Department of Commerce.

Quarterly data for Gross Output can be found at the BEA site here.

For Skousen’s latest quarterly report on GO, see this.

Since the announcement, Gross Output has been the subject of editorials in the Wall Street Journal, Barron’s, and other financial publications, analyzed in the Eastern Economic Journal, and is now being included in leading economics textbooks, such as Roger Leroy Miller’s new 18th edition of Economics Today. Economists are now producing GO data for other countries, including the UK and Argentina.

In this third printing of Structure of Production, Skousen shows why GO is a more accurate and comprehensive measure of the economy because it includes business-to-business (B2B) transactions that move the supply chain along to final use. (GDP measures the value of finished goods and services only, and omits most B2B activity.) GO is an attempt to measure spending at all stages of production.

As Dale Jorgenson, Steve Landefeld, and William Nordhaus conclude in “A New Architecture for the U. S. National Accounts,” “Gross output [GO] is the natural measure of the production sector, while net output [GDP] is appropriate as a measure of welfare. Both are required in a complete system of accounts.”

Skousen states, “Gross Output fills in a big piece of the macroeconomic puzzle. It establishes the proper balance between production and consumption, between the ‘make’ and the ‘use’ economy, between aggregate supply and aggregate demand. I make the case that GO and GDP complement each other as macroeconomic tools and that both should play a vital role in national accounting statistics, much like top line and bottom line accounting are employed to providing a complete picture of quarterly earnings reports of publicly-traded companies.”

He concludes, “Because GO attempts to measure all stages of production (known as Hayek’s triangle), it is a monumental triumph in supply-side ‘Austrian’ economics and Say’s law.”

Using GO, Skousen demonstrates that consumer spending does not account for two-thirds of the economy, as is often reported in the financial media, but is really only 30-40% of total economic activity. Business spending (B2B) is over 50% of the economy, and thus is far larger and more important than consumer spending, more consistent with economic growth theory, and a better measure of the business cycle. (See chart below.)

GO1stQtr2015-B

About the Author

MARK SKOUSEN is a Presidential Fellow at Chapman University in California. He has taught economics and finance at Columbia Business School, and is a former economic analyst for the Central Intelligence Agency. He received his Ph. D. in economics at George Washington University (1977). He is the editor-in-chief of the investment newsletter Forecasts & Strategies, and author of several books, including The Making of Modern Economics.

Reviews

“Now, it’s official. With Gross Output (GO), the U.S. government will provide official data on the supply side of the economy and its structure. How did this counter revolution come about? There have been many counter revolutionaries, but one stands out: Mark Skousen of Chapman University. Skousen’s book The Structure of Production, which was first published in 1990, backed his advocacy with heavy artillery. Indeed, it is Skousen who is, in part, responsible for the government’s move to provide a clearer, more comprehensive picture of the economy, with GO.” — Steve H. Hanke, Johns Hopkins University (2014)

“The development of Gross Output is a good idea and a better measure [of economic activity] than GDP.” — David Colander, Eastern Economic Journal (2014)

“This is a great leap forward in national accounting. Gross Output, long advocated by Mark Skousen, will have a profound and manifestly positive impact on economic policy.” –Steve Forbes, Forbes magazine (2014)

“Skousen’s Structure of Production should be a required text at our leading universities.” (referring to second edition) –John O. Whitney, Emeritus Professor in Management Practice, Columbia University

“Monumental. I’ve read it twice!” (referring to first edition, published in 1990) — Peter F. Drucker, Clermont Graduate University

“I am enormously impressed with the care and integrity which Skousen has accomplished his work.” — Israel Kirzner, New York University

For Interviews or Lectures

To interview Dr. Mark Skousen or arrange a lecture, contact him at mskousen@chapman.edu, or Valerie Durham, Media Relations, 410-570-0535, or email her at vdurham@skousenpub.com.

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U.S. Economy Doing Better Than Expected

U. S. ECONOMIC ACTIVITY HOLDS STEADY IN 1ST QUARTER 2014

Washington, DC —  Gross Output, a broader measure of  U. S. economic activity published by the Bureau of Economic Analysis, held steady at $30,210.6 billion in the first quarter of 2014.

“The GO data demonstrates that the economy is not as bad off as GDP figures initially suggested,” stated Mark Skousen, editor of Forecasts & Strategies and a Presidential Fellow at Chapman University, who champions Gross Output as a more comprehensive measure of economic activity.   He introduced Gross Output as a macroeconomic tool in his work The Structure of Production (New York University Press, 1990).  Now the BEA publishes GO on a quarterly basis in its “GDP by Industry” data.

The GO data was released by the BEA on Friday, July 25, 2014:  http://www.bea.gov/iTable/iTable.cfm?ReqID=51&step=1#reqid=51&step=51&isuri=1&5114=q&5102=15 [Read more…]

Marx Madness is Back

“Capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine democratic societies.” — Thomas Piketty, “Capital in the 21st Century” (2014)

The Economist magazine rightly called French professor Thomas Piketty the new Marx, although a watered down Marx. His bestseller (rated #1 on Amazon and the New York Times) is a thick volume with the same title as KCapital in the Twenty-First Centuryarl Marx’s 1867 magnum opus, “Kapital.” The publisher, Harvard University Press, appropriately designed the book cover in red, the color of the socialist workers’ party.

Piketty cites Karl Marx more than any other economist, even more than Keynes. He barely mentions Adam Smith. Instead of the modern scientific name “economics,” he prefers the old term “political economy,” a favorite of radical professors. [Read more…]

Economist Makes Lead Story in the Wall Street Journal….Barron’s….and Forbes

I made the lead story in the Wednesday, April 23, 2014, edition of the Wall Street Journal.  The title:  “At Last, a Better Economic Measure.”  You can read it here:  http://on.wsj.com/PsdoLM

The editors of the WSJ don’t allow the author to see or approve the headline or subhead, but they nailed it perfect.  And I love the cartoon graphics!  It’s a perfect rendition of my four stage model of the economy.

Many readers captured the essence of my message.  As economic forecaster Jim Hagerbaumer of Florida wrote:  “Skousen is introducing a whole new species. This is one of the most important WSJ op-ed articles in years.”

I also wrote about Gross Output (GO) in the December 16, 2013, issue of Forbes.  Here’s the online version, with charts and response to critics:

My original article in Forbes Magazine (December 16, 2013):

Mark Skousen, Beyond GDP: Get Ready For A New Way To Measure The Economy, Forbes

http://www.forbes.com/sites/realspin/2013/11/29/beyond-gdp-get-ready-for-a-new-way-to-measure-the-economy/

Additional Commentary by Steve Forbes:
Steve Forbes, New, Revolutionary Way To Measure The Economy Is Coming — Believe Me, This Is A Big Deal, Forbes

http://www.forbes.com/sites/steveforbes/2014/03/26/this-may-save-the-economoy-from-keynesians-and-spend-happy-pols/

Gross Output Includes B-to-B….GDP doesn’t [Read more…]

Steve Forbes Endorses My Gross Output Statistic

“Mark Skousen’s Gross Output statistic…will have a profound and manifestly positive impact on economic policy and politics.”  — Steve Forbes, Forbes magazine, April 14, 2014

The Bureau of Economic Analysis will start releasing Gross Output (GO) along with GDP every quarter starting on Friday, April 25.  I consider it a triumph in supply side “Austrian” economics.

I think Steve Forbes captures the importance of this new national statistic in his column in the April 14 edition of Forbes.

Most of the textbook writers are going to include GO in their next edition.  Sean Flynn, now the primary writer of the McConnell/Bruce textbook, is going to highlight it.

Here’s Steve’s commentary — New, Revolutionary Way To Measure The Economy Is Coming — Believe Me, This Is A Big Deal: by Steve Forbes  http://www.forbes.com/sites/steveforbes/2014/03/26/this-may-save-the-economoy-from-keynesians-and-spend-happy-pols/

Here’s my original article in Forbes — Beyond GDP Get Ready for a New Way to Measure the Economy: by Mark Skousen  http://www.forbes.com/sites/realspin/2013/11/29/beyond-gdp-get-ready-for-a-new-way-to-measure-the-economy/

Here’s my op ed in the Wednesday, April 23 edition of the Wall Street JournalAt Last, A Better Economic Measure: by Mark Skousen http://online.wsj.com/article/SB10001424052702303532704579483870616640230.html

 

Chapman Students Are Surprised by the Answer to My Environmental Question

In January, my wife and I had the opportunity to teach at Chapman University, where I am a Presidential Fellow for 2014.  She taught a class in poetry, and I taught “Modern Political Economy:  Who is Winning the Battle of Ideas?”  I used my textbook, “The Making of Modern Economics,” now in its 2nd edition.

One of today’s controversies is about pollution and the environment.  We talked about a recent address by U. S. Secretary of State John Kerry, who warned students in Indonesia that “global warming” is “the greatest challenge of our generation,” more than disease outbreaks, poverty, terrorism and the proliferation of weapons of mass destruction.

Then he demonized anyone who disagrees with him, calling critics of global warming “shoddy scientists and extreme ideologues.” You could say the same about Al Gore.  Kerry added, “We should not allow a tiny minority of shoddy scientists and science and extreme ideologues to compete with scientific fact.”

Kerry is typical of the hysteria surrounding the issue of ecology and the environment. Students are being brainwashed into thinking the problem is getting worse and worse. Kerry and the extreme environmentalists blame any weather disaster, the cold snow in the Northeast or the drought in the West, to global warming.  You can’t argue with these fanatics.

I asked my students at Chapman University, “Has pollution declined or risen in the past 50 years in LA county?”  Over half thought pollution was worse.  The cold, hard fact is that pollution has been reduced sharply in LA county even as gasoline use has risen.  See this chart:

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&docid=pYBObTbuYbS9tM&tbnid=xwtv0ahLCtELQM:&ved=0CAUQjRw&url=http://www.noaanews.noaa.gov/stories2012/20120809_laairqualitystudy.html&ei=ht4EU5jyEKbb2QXRm4CoCg&bvm=bv.61535280,d.aWc&psig=AFQjCNGsuMz1HbLz7IT1IMCVqhIlch9HSA&ust=1392914426522327

The fact is that the average world temperature has been flat or declining for 17 straight years.  If you want to know the facts about global warming and pollution, read this column by Larry Bell in Forbes.com:  http://www.forbes.com/sites/larrybell/2013/08/21/the-new-york-times-global-warming-hysteria-ignores-17-years-of-flat-global-temperatures/

During the class, a journalist visited my class and gave this nice write up:  http://blogs.chapman.edu/happenings/2014/01/28/class-act-economics-comes-to-life-with-mark-skousen-teaching/

I will be returning to Chapman University on Wednesday, April 16, to give a public lecture as part of my Presidential Fellowship.

Students (each holding an American eagle silver dollar) join me in front of the Adam Smith statue at Chapman University.

A Personal Triumph 25 Years in the Making with Launch of New Macro Statistic

For the first time since World War II, the Federal government (Bureau of Economic Analysis) will begin publishing a new macro statistic Gross Output [GO] starting in spring 2014 at the same time it releases its quarterly GDP data.

Forbes.com article has just published my article on this new statistic “Beyond GDP“: http://www.forbes.com/sites/realspin/2013/11/29/beyond-gdp-get-ready-for-a-new-way-to-measure-the-economy/

A shortened version will appear in the Dec. 16 issue of Forbes magazine (circulation over 1 million).

I’ve been advocating this new national statistic since writing The Structure of Production (NYU Press) in 1990. Now it’s finally happening. Steve Forbes calls it a “real breakthrough.”

Steve Moore of the Wall Street Journal and Gene Epstein of Barron’s are looking into writing articles on GO.  So is The Economist.

Bill Nordhaus, professor at Yale University, writes, “Congratulations on the article and the work.  It has been a long slog to get the national accounts to introduce innovative measures, and Steve Landefeld [Director, BEA] has been a superstar in this respect…This will open up the potential for new insights into the behavior of the economy.”

GO goes a long way in providing the right balance in the production-consumption process that is missing in GDP data. As BEA Director Steve Landefeld and co-editors Dale Jorgenson and Bill Nordhaus state: “Gross output [GO] is the natural measure of the production sector, while net output [GDP] is appropriate as a measure of welfare. Both are required in a complete system of accounts.”

I think you’ll find the chart comparing GO and GDP of interest, how GO is consistently more volatile than GDP, and a better measure of the business cycle. (Click on the chart below to go directly to the article)

I’m excited — this is a personal triumph nearly 25 years in the making.

Most of the economics textbook writers are planning to include a section on GO in their next editions (McConnell, Parkin, Gwartney, Hubbard), and economic analysts are now starting to look at it.  In an email, Roger Leroy Miller, professor at University of Texas at Arlington, says that he has added a section on Gross Output for his 18th edition of Economics Today.  It is already part of my own Economic Logic textbook.

I hope you’ll check out the Forbes article, as well as Economic Logic and The Structure of Production for a more in-depth look at this important development.

Report from AEA Meetings in San Diego: The FED = Inflation

I returned early this year from a productive trip to San Diego for the American Economic Association (AEA) meetings, where I met with several top economists, including Nobel Prize winners. One of the most popular sessions was a panel on the 100th anniversary of the Federal Reserve. The most shocking graph was presented by Ken Rogoff, a Harvard economist.


As the graph indicates, there was virtually no inflation prior to 1913, when the Federal Reserve was created (other than wars, which caused temporary inflation) and we went off the classical gold standard. Rogoff noted that since the Fed was created, prices have skyrocketed 30-fold, or 3,000%! This data confirms Murray Rothbard’s contention that the Fed was created to remove the barriers to inflation, not to control it.

Despite the fact that the Fed engineered all of this inflation, caused the Great Depression and failed to regulate the mortgage banks prior to the 2008 crisis, all of the panelists gave high marks to the Fed! (You can bet that won’t be the case at our special panel on the 100th anniversary of the Fed at FreedomFest!)

Another telling sign was the fact that the sessions with super Keynesian Paul Krugman were standing room only, while monetarists including Nobel laureate Bob Lucas had a small turnout.

What does this situation bode for the future? If Krugman has his way, it means greater deficits, more inflation, and higher taxes.